ARROW HIGHWAY STEEL, INC., Plaintiff and Appellant, v. ROBERT DUBIN, Defendant and Respondent.
B303289
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION TWO
Filed 10/29/20
CERTIFIED FOR PUBLICATION; (Los Angeles County Super. Ct. No. EC068969); John J. Kralik, Judge.
APPEAL from a judgment of the Superior Court of Los Angeles County, John J. Kralik, Judge. Affirmed.
Alpert Barr & Grant and David M. Almaraz for Defendant and Respondent.
* * * * * *
In Bendix Autolite Corp. v. Midwesco Enterprises, Inc. (1988) 486 U.S. 888 (Bendix), the United States Supreme Court held that an Ohio statute that tolled the statute of limitations while a defendant is out of state impermissibly burdened interstate commerce and was accordingly unconstitutional. (Id. at pp. 891-895.) California has a similar tolling statute—
FACTS AND PROCEDURAL BACKGROUND
I. Facts
Between 1967 and 1994, Arrow Highway Steel, Inc. (Arrow) hired Robert Dubin (Dubin) to do its bookkeeping and to obtain credit financing for its operations. Both Arrow and Dubin were, during that time, based in California. Dubin obtained Arrow‘s credit financing from out-of-state lenders, and many of Dubin‘s other clients were located outside California.
In the early 1990s, Dubin embezzled money from Arrow. For his crimes, Dubin was convicted of bankruptcy fraud in federal court and served time in federal prison between 1995 and 1998, and after a brief period of parole, in 1998 and 1999.
In March 1994, Arrow and its principals—Seymour and Henrietta Albert—sued Dubin and others to recover the money Dubin embezzled from Arrow.2 On February 27, 1997, Arrow and Dubin entered into a stipulated judgment pursuant to which Dubin agreed to pay Arrow $937,000.
Dubin moved to Nevada after he was released from federal prison (the first time) in 1998. After his final release from prison, Dubin founded a new accounting, bookkeeping and tax business that currently has clients all around the United States and around the world.
II. Procedural Background
On July 3, 2018, Arrow filed a complaint seeking to enforce its 1997 judgment against Dubin, along with interest and attorney fees.
Dubin filed a motion for summary judgment on the ground that Arrow‘s lawsuit was time-barred because
“‘subject to suit in California in perpetuity.‘” As to the second part, the court found that California‘s interests did not “outweigh [this] burden” because the justification for tolling lawsuits against out-of-state defendants was largely undermined by “California[‘s] . . . long-arm statute,” which “would permit service on a[n out-of-state] defendant like Dubin.” Balancing these factors, the court found that applying
Following the entry of judgment, Arrow filed this timely appeal.
DISCUSSION
Arrow argues that the trial court erred in granting summary judgment for Dubin because, in its view,
A party in a civil case is entitled to summary judgment if, among other things, he can show that the undisputed facts “establish[] an affirmative defense” “as a matter of law.” (
California‘s Enforcement of Judgments Law (
enforceability of a final judgment two options: (1) they can file an application with the court that issued the judgment to renew that judgment for another 10 years (
If the judgment creditor pursues the latter option, it must file its action within 10 years of the final entry of judgment or its last renewal of judgment, whichever comes later. (
“[1] If, when the cause of action accrues against a person, he is out of the State, the action may be commenced within the term herein limited, after his return to the State, and [2] if, after the cause of action accrues, he departs from the State, the time of his absence is not part of the time limited for the commencement of the action.”
(
California at the moment the cause of action accrues, but he subsequently “departs” the state. (Kohan v. Cohan (1988) 204 Cal.App.3d 915, 920 (Kohan).) This second clause applies whether the departure is temporary (Green, supra, 5 Cal.App.4th at p. 1223) or permanent (Heritage Marketing & Ins. Services, Inc. v. Chrustawka (2008) 160 Cal.App.4th 754, 761 (Heritage)).
In this case, Arrow‘s stipulated judgment against Dubin was finally entered on the day it was signed—February 27, 1997. (See Cadle Co. II, Inc. v. Sundance Financial, Inc. (2007) 154 Cal.App.4th 622, 624 [generally, “[a] stipulated judgment . . . becomes final when entered“].) As a consequence, Arrow had 10 years—until February 27, 2007—to bring its enforcement action. Arrow did not do so until July 3, 2018. The only way that Arrow‘s enforcement action is timely is if
I. The Law of the Dormant Commerce Clause
A. Generally
The Commerce Clause of the United States Constitution grants Congress the power “[t]o regulate Commerce . . . among the several States.” (
whole objective of the dormant Commerce Clause doctrine is to protect Congress‘s latent authority from state encroachment“].) This “negative implication” of the clause is commonly referred to as the “dormant Commerce Clause.” (Davis, at pp. 337-338.) In defining the contours of the dormant Commerce Clause, the courts have sought to preclude states from engaging in “economic protectionism” (that is, from adopting laws “designed to benefit in-state economic interests by burdening out-of-state competitors“) while at the same time allowing the states to retain one of the chief attributes reserved to them as members of our federalist system of government (that is, the ability to operate as semi-autonomous laboratories able to experiment and innovate in regulating their own affairs and economies). (New Energy Co. v. Limbach (1988) 486 U.S. 269, 273-274; Davis, at p. 337-338; Ariz. State Legis. v. Ariz. Indep. Redistricting Comm‘n (2015) 576 U.S. 787, 817 [“‘recogniz[ing] the role of the States as laboratories for devising solutions to difficult legal problems’ [citation]“].)
In assessing whether a state law violates the dormant Commerce Clause, courts are to ask two questions: (1) Does the state law “discriminate[] against interstate commerce,” and if not, (2) Does the state law nevertheless incidentally burden interstate commerce? (Davis, supra, 553 U.S. at p. 338; McBurney, supra, 569 U.S. at p. 235.) A state law discriminates against interstate commerce if its purpose or “‘practical effect‘” is to discriminate against interstate commerce by giving local interests or residents a leg up on out-of-state interests or residents. (Maine v. Taylor (1986) 477 U.S. 131, 138 (Maine); Pacific Merchant, supra, 639 F.3d at p. 1178.) Such a discriminatory state law is valid only if it “‘advances a legitimate local purpose that cannot be adequately served by reasonable
nondiscriminatory alternatives.‘” (Or. Waste Sys., Inc. v. Dep‘t of Envtl. Quality (1994) 511 U.S. 93, 100-101 (Oregon Waste).) A state law that “‘regulates evenhandedly‘” but nevertheless has “’ “incidental effects” on interstate commerce‘” is valid as long as its burden on interstate commerce is not “‘clearly excessive in relation to [its] putative local benefits.‘” (Oregon Waste, at p. 99; Pike v. Bruce Church (1970) 397 U.S. 137, 142.)
B. The Bendix case
State laws that toll the statute of limitations on civil actions for out-of-state defendants (but not in-state defendants) are not uncommon. The leading case examining whether they run afoul of the dormant Commerce Clause is Bendix, supra, 486 U.S. 888.
Bendix examined an Ohio law that tolled the statute of limitations for any person or corporation not “present” in the state. (Bendix, supra, 486 U.S. at p. 889.) In that case, a Delaware corporation sued an Illinois corporation in Ohio and sought to avoid the applicable four-year statute of limitations by invoking the Ohio tolling law on the ground that the Illinois corporation was not present in Ohio because it had not appointed an agent for service of process in Ohio. (Id. at pp. 889-890.) As a threshold matter, Bendix held that review under the dormant Commerce Clause is warranted if a state “denies ordinary legal defenses or like privileges to out-of-state persons or corporations engaged in commerce.” (Id. at p. 893.) This threshold was satisfied because Ohio‘s statute denied the Illinois corporation the right to rely on the statute of limitations defense due to its out-of-state status.
examined (1) “[t]he burden the tolling statute places on interstate commerce,” and (2) the state‘s “putative interests” supporting the law. (Bendix, supra, 486 U.S. at pp. 891-892Bendix found that the tolling law placed a “significant” burden on interstate commerce because it “forces” an out-of-state “corporation to choose between exposure to the general jurisdiction of Ohio courts” (by effectively becoming an Ohio resident by designating an agent for service of process), on the one hand, and “forfeiture of the limitations defense[ and] remaining subject to suit in Ohio in perpetuity” (by remaining out of state), on the other hand. (Id. at p. 893.) At the same time, Ohio‘s putative interest in the tolling law was weak: The law was meant to “protect[]” Ohio “residents from corporations who become liable for acts done within the State but later withdraw from the jurisdiction,” but this interest was not appreciably advanced by the tolling law because a very similar protection was already provided by Ohio‘s “long-arm statute,” which “would have permitted service” on the Illinois corporation “throughout the period of limitations.” (Id. at p. 894.) Bendix consequently held that “the burden imposed on interstate commerce by the tolling statute exceed[ed] any local interest that the State might advance.” (Id. at p. 891.)
C. Analytical framework
In light of the general law governing the dormant Commerce Clause, and the specific application of that law to tolling statutes aimed at out-of-state defendants in Bendix, analyzing whether
defense[] or like privilege[]” to an “out-of-state person[] or corporation[] engaged in commerce.” (Bendix, supra, 486 U.S. at p. 893, italics added.) Second, and if Dubin was engaged in interstate commerce, then the court must determine whether
A. Was Dubin engaged in interstate commerce?
In setting forth its threshold requirement that the out-of-state defendant be “engaged in [interstate] commerce,” Bendix did not specify whether the defendant had to be so engaged at the time of the underlying transaction giving rise to the lawsuit or, instead, at some point thereafter. (Bendix, supra, 486 U.S. at p. 893.) Most of the cases examining
Cal.App.4th at p. 643 [same, but concluding that a “single amicable loan” transaction between two California residents did not involve interstate commerce]; Mounts v. Uyeda (1991) 227 Cal.App.3d 111, 122 [same, but concluding that underlying automobile altercation involving two California residents as private parties did not involve interstate commerce].) We need not decide whether the time of the underlying transaction should be the sole focus because it is undisputed in this case that Dubin was involved in interstate commerce both at the time he embezzled money from Arrow (which is what gave rise to the stipulated judgment in this case) and currently, in his interstate and international accounting, bookkeeping and tax practice.
Thus, the answer to this first question is “yes.”
B. Does section 351 discriminate against interstate commerce in purpose or practical effect?
defendants regardless of their residency or at what point in time they left the State of California. Although, as a practical matter,
Thus, the answer to this second question is “no.”
C. Does section 351 place burdens on interstate commerce that are clearly excessive in relation to its putative local benefits?
Like the state tolling law at issue in Bendix,
Cheng (1999) 71 Cal.App.4th 1276, 1283-1284 (Filet Menu); Heritage, at p. 760.)4 This is certainly the case here, where Dubin has set up an entire new interstate—and international—business in Nevada.
sure,
Thus, the answer to the third question is “yes,” and
II. Arrow‘s Arguments
Arrow proffers three main reasons why the analysis set forth above is incorrect: (1) that analysis is out of step with the Sixth Circuit‘s recent decision in Garber, supra, 888 F.3d 839, (2) that analysis is different—and comes out in Arrow‘s favor—when
In 2018, the Sixth Circuit held that the Ohio tolling law found to violate the dormant Commerce Clause in Bendix did not run afoul of it as applied to an Ohio resident who moved out of state to retire before being sued. (Garber, supra, 888 F.3d at pp. 840, 844-845.) Like Bendix, Garber recognized that Ohio‘s tolling law put defendants to a choice—stay in Ohio and run down the statute of limitations clock, or move away and remain subject to suit indefinitely. (Garber, at p. 844.) But Garber viewed this forced choice as being no different from a myriad of other state laws that “provide benefits to residents that the residents put in jeopardy if they move” out of state. (Ibid.) What is more, Garber regarded such state laws—that is, laws aimed at “attract[ing] and retain[ing] residents through policy choices“—as being “a healthy byproduct of the laboratories of democracy in our federalism-based system of government, not a sign of unconstitutional protectionism.” (Ibid.) For support, Garber drew upon McBurney, supra, 569 U.S. 221. McBurney held that a Virginia law that made all public records “‘open to inspection and copying‘” to Virginia residents (but not to nonresidents) did not violate the dormant Commerce Clause because it “merely provide[d] a service to local citizens that would not otherwise be available at all“; because Virginia itself had “created” the “‘market’ for public documents in Virginia,” McBurney held, its law restricting access to in-state residents did not “‘interfere[] with the natural functioning of the interstate market.‘” (McBurney, at pp. 223, 235, italics added.) Garber read McBurney as declaring that there is no dormant Commerce
Clause defect with state laws that “discourage[] [in-state residents] from moving to other States because they would lose” a benefit. (Garber, at p. 844Garber went on to assume that the Ohio tolling law might violate the dormant Commerce Clause if the defendant had introduced “proof of real burdens” imposed by the law (id. at p. 845), but found that the defendant in that case had not done so. Garber distinguished Bendix on the ground that the tolling law, when applied to a defendant who had once been a resident of Ohio, “merely creates a benefit for residents of Ohio.” (Id. at p. 846.)
Were the slate blank, we may well agree with Garber‘s analysis. But the slate is anything but blank.
As Arrow itself recognizes, Garber is inconsistent with how the California courts have applied the dormant Commerce Clause to
What is more, Garber appears to be in tension—if not downright inconsistent—with Bendix itself. As explained above, Bendix concluded that the very same Ohio tolling law imposed a “significant” burden on interstate commerce by “forc[ing]” a defendant who is out of the state after a lawsuit is filed “to choose between” moving back to Ohio (in order to run down the statute of limitations clock) or to remain out of state (and thus remain subject to suit “in perpetuity” and thereby lose the statute of limitations defense). (Bendix, supra, 486 U.S. at p. 893started out as an Ohio resident. Garber‘s attempt to distinguish Bendix on this ground is, for that reason, unpersuasive. Further, Garber‘s chief rationale appears to conflate two separate strands of dormant Commerce Clause analysis. Garber analogizes the Ohio tolling law to state laws that deny benefits to residents who leave a state and finds them constitutionally valid because such laws are “not a sign of unconstitutional protectionism” (Garber, supra, 888 F.3d at p. 844), but the dormant Commerce Clause inquiries into a discriminatory purpose on the one hand, and into an excessive burden on interstate commerce on the other, are distinct. (Davis, supra, 553 U.S. at pp. 338-339Garber‘s conclusion that the Ohio tolling law, as a state law denying benefits to residents who move away, has no discriminatory purpose does not undermine Bendix‘s wholly independent holding that the very same law imposes an unconstitutionally excessive burden on interstate commerce. Nor does McBurney cast any doubt (or, for that matter, any shade) on Bendix because, as McBurney itself acknowledged, it involved a public records access
law that created a wholly new market but limited access to that market, whereas the tolling law at issue in Bendix created an excessive burden on the already existing interstate commerce marketplace.
Because we conclude that Garber is inconsistent with California law and with Bendix itself, we decline to follow it.
By its plain text,
incentive to return to California, Arrow concludes, it does not excessively burden interstate commerce.
Arrow‘s argument takes an impermissible “alternate timeline” approach to constitutional analysis. As noted above, Arrow is correct that judgment creditors have the statutory right to renew their judgments if they do so within 10 years. (
section 351
Although our Supreme Court has upheld
equal protection grounds]), this finding says nothing about
DISPOSITION
The judgment of dismissal is affirmed. Dubin is entitled to his costs on appeal.
CERTIFIED FOR PUBLICATION.
HOFFSTADT, J.
We concur:
ASHMANN-GERST, Acting P.J.
CHAVEZ, J.